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FFR 46 – Buy Gold, Flip Houses – Or Build Wealth With Real Estate

Gold prices are on the upswing again after months of slumping, and the precious metals market is once again teasing investors with the promise of big gains – fast. But the nature of that kind of investing means that while investors may make money, it’s a bit of instant gratification that has little to offer for the long term. And that’s what makes real estate the investing gift that keeps on giving – as long as you don’t treat it like gold.

Guest: Jason Hartman

Precious metals investing offers investors the chance to make a profit, sometimes very substantial, if they sell quickly when the price is right. But as Shawn Watkins of Investing Workshops explains it, once the deal is done, what profit an investor makes is static. In order to make more money, it’s necessary to buy more gold –at a price that may be very different. And that gold isn’t going to be working for an investor: yielding a regular annual return, or earning tax breaks and credits.

Real estate can – as long as you don’t treat it like gold. House flipping – buying real estate at low prices and selling it as fast as possible for a profit -is a lot like buying gold. House flippers don’t look to the long term – they turn their profits back into the next house, and the next one.

Because house flippers sell as soon as they can, they lose the opportunity to make long term returns in the form of rents and tax breaks. And they may face even more taxes on profits made from the sales of assets. What’s more, any profits made can be devoured by the next attempt to get back into the investing game.

Investors who build long-term wealth put their assets to work for them, with a steady return year after year and the annual round of tax breaks that make real estate the most tax friendly investment available. While house flipping does involve buying residential real estate, the fast turnaround eliminates all those opportunities for ongoing returns.

As Jason Hartman says, buying – and holding – residential property is the key to building long term wealth. The steady return from rents, along with the still-formidable list of tax breaks and credits available to investors in income property may not be as dramatic as buying gold – or flipping houses – but for creating solid income streams, it’s no flash in the pan.